Monthly Archives: May 2009

Don’t miss Professor Ilya Somin’s discussion on the Volokh Conspiracy about the fallacy of categorizing court decisions involving eminent domain, as eithet pro-business or anti-business. Go to http://volokh.com/posts/1243651525.shtml to check it out.

In a nutshell, what is going on is that left-liberal commentators and journalists are often besotted with the idea of the government taking property from its rightful owners for some public purpose (like roads, government buildings etc.) or for some “public-private” scam like redevelopment, that is labeled a “public use” even what it plainly and primarily benefits private business interests at public expense. But Professor Somin’s point brigs to mind something else that we have had occasion to think about during our decades in the condemnation law biz.

It is also misleading to classify court decisions in these cases as being conservative vs. liberal. Why? Because conservative judges are often authority-oriented and tend to rule for the authority figure like the government, while liberal judges ostensibly favor the individual and under the right circumstances can summon the will to rule against the government which is what they tend to do in non-condemnation cases. Thus, in California, impeccably liberal judges, like the California Supreme Court Associate Justice Stanley Mosk were capable of producing opinions that favored the condemnees’ side both on the right to take and on issues of compensation.

Thus, on the former point, Justice Mosk was the author of the forceful dissent in the leading excess condemnation case, People v. Superior Court (Rodoni) 68 Cal.2d 206 (1968) where he objected to the state’s taking of some 50 acres of land in excess to what it concededly required for a freeway. He was proven right when a few years later the California Little Hoover Commission investigated the state’s excess land acquisition program and found that, far from saving money as claimed by the state, it was a rathole for public funds. Proceeding under it, the state had acquired some $100 million worth of land which it could neither use nor sell.

On the other hand, Frank Richardson, the leading conservative Justice on the California Supreme Court, authored the two opinions that (at least in our view) were probably the most harmful, anti-property opinions rendered by that court: Agins v. City of Tiburon, 24 Cal.3d 266 (1979) (denying compensation for regulatory takings, but overruled in First English etc. Church v. County of Los Angeles, 482 U.S. 304 (1987)), and City of Oakland v. Oakland Raiders, 32 Cal.3d 60 (1982) (giving the “public use” clause an expansive interpretation and finding that a city’s taking of an NFL franchise to prevent the Raiders from moving out of Oakland was a “public use”).

It seems to us that the Libertarian vs. Statist test is more useful in predicting which judges will vote which way, but it too is unreliable. Also, in more recent years, we have seen the emergence of a doctrinaire segment of the judiciary that irrespective of its right-left breakdown is under almost all circumstances opposed to private property rights when they collide with government takings, particularly regulatory inverse condemnation takings. The best example of that phenomenon is the ferocious hostility to inverse takings claimants, that is displayed by many federal judges, even nominally condervative ones — Judge Richard Posner of the 7th Circuit being the proverbial “Exhibit A.”

The good news is that a number of state courts have been so repelled by the unabashed extremism of the U.S. Supreme Court’s Kelo decision that they have reacted by curbing their states’ taking power — e.g, Illinois, Michigan, Ohio, Oklahoma, Pennsylvania, South Carolina, and sometimes New Jersey.

Follow up. Right after finishing the above post, we came across a fascinating item on Timothy Sandefur’s blog ( http://sandefur.typepad.com/freespace/ ) in which he points to the observation of Sharon Love that the vaunted personal liberalism of the left is largely focused on sexual activities, which is why it is so appealing to the young whose hormonal output tends to overcome their intellectual product. Which, if true, would also tend to explain why people tend to grow more conservative as they age.

For a concise summary of U.S. Supreme Court nominee Judge Sonia Sotomayor’s record on eminent domain issues while sitting on the U.S. Court of Appeals for the Second Circuit, see the effort of our fellow blogger Robert Thomas on www.inversecondemnation.com

The Wall Street Journal carries an interesting front-page article on the continuing decline and fall of malls. (Kris Hudsch and Vanessa O’Connell, Recession Turns Malls Into Ghost Towns, Wall St. Jour., May 22, 2009, at p. A1). It’s a continuation of the familar story on which we blogged in the past — see our posts on that subject, dated Apr. 16 and 17, and May 15, 2009.

“Some analysts estimate that the number of so-called ‘dead malls’ — centers debilitated by anemic [retail] sales and high vacancy rates — will swell to more than 100 by the end of this year.”

But that leaves a mystery that we have not seen addressed in the press. At least some of those malls were created as urban redevelopment projects, which means that tax-free municipal TIF bonds were issued to finance them. So our question is: what happened to those bonds and the bondholders? Have the issuing agencies defaulted? Or are they continuing to service them? And if so, where is the money coming from? If any of our readers know, please do enlighten us.

The Los Angeles Times (Peter Y. Hong, Price Drop Gives Home Sales Lift, May 20, 2009, at p. B1) confirms the suspicions that we have been harboring for some times. Yes, there are mass foreclosures. But they are in distressed areas that are low down on the socio-economic scale, such as the Inland Empire, and similar places where in recent years developers put up a bunch of downscale homes and were able to sell them to socio-economically downscale buyers who ordinarily would not qualify for financing, but who could do so during the insane time when bankers were throwing money at any would-be home buyer, including would-be buyers with an IQ of less than their body temperature. We mean no undue disrespect to those folks — they were often flim-flammed by outlandish projections of future profits, but reality is what it is, and the best of intentions cannot erase it. Those are the people with average or below-average incomes, who nonetheless bought houses for high six-figure prices, without a prayer of being able to maintain monthly mortgage payments on loans of that size, thus setting themselves up for the inevitable crash when the housing bubble popped.

What the L.A. Times reports is that apart from these unfortunate folks, the ballyhooed crash in home prices is not really happening across the board — at least not uniformly and not yet. Oh sure, there have been some declines in selling prces, but nothing as dramatic as the headlines suggest. Thus, upscale neighborhoods are doing OK, thank you very much, because people who live in them are usually affluent and under no real pressure to sell their homes. They either keep them off the market, or they list them and then hang tough, waiting for a must-have buyer or for the housing market to recover.

Last November and December (11/16/08 and 12/2/08 respectively) we blogged about the strange doings in the Pacific Northwest, where environmentalists are demanding that perfectly sound, functioning hydroelectric dams be torn down to make life easier for salmon. Mind you, we have nothing against salmon. In fact we enjoy our gravlachs as much as the next fellow, and would be saddened were it to disappear from grocery shelves. On the other hand, we are daily bombarded with exhortations from the environmentalists who are demanding that we reduce our carbon emissions and our dependence on fossil fuels, or else we may find ourselves an endangered species too.

Obviously, if you are going to tear down hydroelectric dams, you are going to increase carbon dioxide emissions and increase consumption of fossil fuels. Still, the tear-’em-down folks are at it again. Today’s Los Angeles Times reports (Kim Murphy, Dams Could Fall to Save Salmon, May 20, 2009, at p. A17) that in a litigation over protecting the salmon, James A. Redden, the federal judge presiding over that litigation, has written to the parties, raising the issue of whether four hydroelectric dams on the Snake River should be breached to help the salmon. This is no small matter because these dams generate enough elctricity to take care of the needs of Seattle, and they also provide a port in Lewiston, Idaho, that allows the barging of cargoes of grain 140 miles down the river.

On the third hand, so to speak, federal scientists think that conditions for the salmon can be improved without breaching those dams. But the judge thinks that government scientists are relying improperly “on speculative, uncertain and unidentified tributary and estuary habitat improvement actions to find that threatened and endangered salmon and steelhead are, in fact, trending toward recovery.”

So it’s back to the drawing board, to do some heavy thinking and come up with a solution that may or may not exist, depending on who you ask. We can’t wait to see how this one turns out. Stay tuned.

An afterthought: Howcum whyizzit that when when it comes to the law of eminent domain, judges proclaim themselves to be incompetent to review the social, engineering or environmental reasons offered by the mavens working for the condemning authority in support of the taking, and explain that such decisions by municipal experts are “well-nigh conclusive,” as the U.S. Supreme Court put in in Berman v. Parker, whereas, when it comes to environmental cases, the same judges come alive and freely overrule expert technical engineering and planning decisions that often concern subjects on which judges generally lack any background or expertise?

No folks, we are not making this up and it isn’t April 1st either, but when we turned on the ol’ computer this morning, there it was big as life. A post by Steven Litt, the architectural critic of the Cleveland Plain Dealer, on Cleveland.com, describes a plan whereby the local government would acquire land in Cleveland, raze any structures on it and convert it into a large “land bank” devoted to gardening and farming. If you want the details, such as they are, go tohttp://blog.cleveland.com/architecture/2009/05/cuyahoga_county_land_bank_coul.html

and check it out for yourself, since we don’t quite feel up to the task of doing justice to this loony scheme. Suffice it to say that the money for it would come from inter alia the federal government, like HUD, Freddie and Fannie and — what else? — the stimulus funds, which is to say from your pocket. Just how converting Cleveland into gardens would stimulate the economy, where repeated redevelopment schemes pursued over a period of decades have failed, goes without explanation. Your tax money at work, as it were.

We resist the temptation to probe the unintetionally humorous aspects of this caper, and we only note that for many years Cleveland has been a near-basket-case as American cities go. After the crash, the old blighted conditions have been exacerbated by mass foreclosures and mass abandonments of homes in the city. Now this.

What caught our eye is that the use of eminent domain to accomplish this feat has been suggested, but under the Ohio Supreme Court’s Norwood case and new Ohio legislation forbidding takings for economic development that option would appear to be out. So what? Such trifles have never stopped the folks in city hall from giving condemnation a shot, nor has it stopped some judges from going along with the gag.

So let’s stay tuned on that one and see if these folks are actually going ahead with it. If they are, that will only be another landmark in the decline of American cities.

The newspapers have been duly reporting the imminent calamity that is about to befall car dealerships. Chrysler and General Motors face bankruptcy, and as part of their shrinkage, both are in the process of terminating a bunch of car dealerships to reflect the reality of drastically lower car sales. But there is more to this problem than just car dealerships. Over the years, many cities got the bright idea that if they created what around here is known as “auto malls,” they would get to collect gobs of sales taxes charged on car sales — a big deal when cars sell for tens of thousands of dollars each. With sales taxes of around 8%, each car sale can generate sales taxes in the thousands of dollars, with cities pocketing one percent out of each 8% collected for sales taxes (that’s 12.5% of all sales taxes collected). So when you have a car mall within city limits, it’s sort of like having a municipal money printing machine. At least, that’s the way it was.

This is of special interest to us because in the olden days, say about 20 years ago, more that 20% of auto malls were in California, and most of those were in the Los Angeles basin, accounting for 20% to as much as 40% of municipal sales tax revenues. You can read all about it in a Los Angeles Times article by Frank Clifford, entitled Pirating the Auto Retailers, November 9, 1990 (you can get it on Lexis – go to news, click on Los Angeles Times, and type in “Frank Clifford” and “auto malls”).

A fascinating feature of Clifford’s article is that it correctly foreshadowed the hazards of a declining economy and its consequent impact on car sales and sales tax revenues:

“Because of the region’s booming economy, the last decade produced more winners than losers among auto mall combatants. But experts warn that that the auto mall business is on the verge of a shakeout that could reduce the number of dealers nationwide by as much as 60% by the end of the decade. A steep recession could accelerate the process and spell trouble for cities that have entrusted much of their financial health to auto dealers.

“A downturn in the economy of 15% to 20% is going to create real stress. The impact could be enormous,” said William Carlson, executive director of the California Redevelopment Assn.” (emphasis added).

And so it came to pass. Enter the Great Recession with its drastically diminished car sales, and as of today, a drastically reduced number of car dealers. California cities are now discovering that they are facing a dramatic decline in their sales tax revenues. Thus, the L.A. Times reports that the city of Cerritos whose auto mall boasts of being the largest in the world, used to get over $30 million per year from those sales taxes – a third of its budget — but is now looking at a sales drop of 21%. Roger Vincent, Cities Brace for Shutdown of Dealerships, L.A. Times, May 14, 2009, at p. B1.

So what does all that have to do with this blog that is primarily concerned with eminent domain? As it turns out, quite a lot. Many of the malls (some general shopping malls and some auto malls) were created by cities as redevelopment projects – the cities took land from the indigenous owners and turned it over to car mall owners for a fraction of the acquisition cost. Such a bargain! They did that in the name of clearing “blight” but actually with an eye on those lush sales tax revenues, even though in California redevelopment takings for the purpose of increasing municipal revenues are illegal. But like all money making schemes, this one too carried with it the familiar risk of failure, which is why such schemes should not be undertaken by placing public funds at risk.

And thus we come to our familiar concluding refrain: he who lives by the sword dies by it. It looks like all those cities that profited from their [mis]use of eminent domain to create auto malls will now have to face economic reality. Like the Bible says, after seven fat years come seven lean ones, and he who disregards that verity winds up having to eat the green weenie. But maybe, just maybe, this harsh lesson will bring home the need for responsible civic governance which requires that those who would govern us have to face up to their responsibility and make it clear to the voters that sound governance is not cost-free, that there is no such thing as a free lunch and that he who thinks otherwise is setting himself up for a fall.

Since we write a stone’s throw from Tinseltown, we tend to award Oscars for outstanding performance, and the New York judiciary has just turned in a breathtaking bravura performance that calls for such recognition. The Oscar for writing an opinion approving a litigation outcome while holding the judicial noses, goes to the New York Appellate Division, First Department, for its virtuoso performance in Develop Don’t Destroy Brooklyn v. Urban Development Corp., 874 N.Y.S.2d 414. It’s the state court counterpart of Goldstein v. Pataki, a lawsuit challenging the use of eminent doimain for the Brooklyn Atlantic Yards redevelopment project. Since it’s hard to do justice to their Lordships’ handiwork, here it is, in their own words.

“In the many years since Kaskel, agency blight findings have been found deficient in this State only where they were utterly unsupported, and there has been no case in which the condition of an area has been deemed sufficiently at odds with an agency blight findingto raise a factual issue as to whether the agency exceeded its authority in making the finding. This is not because the limits of the blight concept have been untested. Indeed, if ever a claim of blight challenged one’s common-sense understanding of the term in a case in which the city urged that the Coliseum site at Columbus Circle (now the location of the Time Warner Building) — undoubtedly, even at the time of litigation, one of the most valuable pieces of real estate in the City, bordering on the very exclusive southwestern corner of Central Park – was blighted and thus appropriate for designation as an urban renewal site. This Court, however, citing Kaskel, and accepting the city’s contention that the site was outmoded, underbuilt and insufficiently utilized, found the proposed designation proper notwithstanding the site’s obvious, indisputable potential for private development. The point to be made is that ‘blight’ has proved over time to be a highly malleable and elastic concept capable of enormously diverse application. This is not in the main attributable to the ingenuity of consultants eager to please the developers who pay their bills, but because the concept, when the field of its likely use, is more facilitative than limiting.” 874 N.Y.S.2d at 424, emphasis added, citations omitted.

So there you have it folks: the concept of blight is so “malleable” that, try as they may, their Lordships have never met a blight finding they didn’t like. New York, it turns out, has achieved such a state of civic perfection that none of its saintly politicians have ever abused the power of eminent domain in the redevelopment context, nor have they ever sought to use it in such a way as to raise so much as an issue of fact. Wow!

Special honorable mention goes to Justice Catterson, for his concurring opinion. The wonder of it is how Justice Catterson could say what he said and still rule in favor of the condemnor. Here goes:

“I reject the majority’s core reasoning, that a perfunctory “blight study” performed years after the conception of a vast development project should serve as the rational basis for a determination that a neighborhood is indeed blighted.”

* * *

“In my view, the petitioners are correct in asserting that the blight study failed to comport with the majority of the specific criteria set out in AKRF’s contract. Furthermore, ESDC’s contention that ‘as a matter of law,’ ESDC could only look at conditions contemporaneous with the study, which was conducted years after the announcement, is ludicrous on several levels.”

No comment appears necessary, except perhaps to tell New Yorkers who may be reading this blog, that next time some politician — black-robed or otherwise — starts pontificfating about “judicial independence,” remind him of this opinion in which the judges recognized that there was no basis for their decision, but they rendered one in favor of the condemnor anyway in a sort of a the-devil-made-us-do-it performance.

Update: We are informed by an eagle-eyed reader in New York, that we got our cases mixed up. The above case (Develop Don’t Destroy Brooklyn) is not the state-court counterpart of Goldstein v. Pataki, but rather litigation concerning the adequacy of the environmental impact report preceding the construction of the Atlantic Yards project.

Another case, Goldstein v. N.Y. State Urban Dev. Corp., just decided by the New York Appellate Division, Second Department, is the state-court counterpart of Goldstein v. Pataki. The only citation we have now is (2009 NY Slip Op 03903), but it should be available on Lexis and Westlaw any time now. It too ruled against the project challengers.

Forbes.com of May 5, 2009, has an article by Peter Gertler, entitled Trains and the City. It tells us that high-speed train mavens are predicting that the advent of high-speed trains will stimulate a building boom in cities around the train stations. Oh yeah? Maybe. And maybe in the sweet bye and bye there will be pie in the sky, but being the skeptical curmudgeon we are, that remains to be seen.

The reason for our skepticism is that we have heard that story before, and somehow the reality behind it has never matertialized. In Los Angeles, for example, they actually set up special assessment districts around subway stations in anticipation of new construction. It didn’t happen.

Ten years ago, a developer offered Anna Mae “Babe” Ahearn $25 million for her golf course, in order to build a Home Depot store. But the local village of Evergreen Park nixed that deal by refusing to rezone the property for big-box uses. Time went on and in due course the village decided to acquire that golfcourse itself. So it evidently had the chutzpa to offer Ahearn $5 million which she sensibly turned down. Later the village filed a condemnation action to take it. After a one-week jury trial the verdict came in at $25,000,000.